Tag Archives: home ownership

Figuring Out How Much House We Can Afford with RSUs

We are going to buy a house. It is not the most financially wise decision, but life isn’t about always being financially wise–sometimes you have to splurge (within reason) and take risks. I accept that buying a house will reduce our total networth in the future, and I’m ok with that. After all, what is the point of making money if you can’t enjoy it, and what would I enjoy more than having a home of my own to raise my kids in? Sure I’d love to take lots of international trips and such, but with a toddler and one on the way (and maybe one more in 2-3 years), that’s not happening for a while. My house will be my Paris and Prague and Tokyo.

But one thing has been very difficult to figure out — how much we can afford. All home buying calculators assume you have a fairly consistent income that goes up by a consistent percentage every year. That isn’t reality for us. There are many ways to figure out how much you can afford, but one model that I’ve decided I like is 28% of pre-tax income (I’d prefer to do post-tax but if I do that I’ll never afford a home here.)

I worked out the chart below, which shows potential annual income (pre tax) with the amount of mortgage (PITI total) we can afford per month (on the right) and then on the let, I have the house price and the total amount of PITI with a 3.5% 30 year fixed loan. Our goal would be to afford a $1.7M home with an in-law, where my father-in-law would pay some rent. This means based on the chart below we need to make $320,000 per year, consistently, to afford a home at this price point. (*my insurance estimates are probably way off but I tried to figure out what home insurance would cost in California with earthquake insurance tacked on — if these numbers look wrong please let me know in a comment.)

Total Year Total Month Mortgage Max (28%) Total Monthly House Price Mortgage (3.5) Taxes Insurance Earthquake
$210,000 $17,500 $4,900 $4,872 $1,000,000 $3,412 $933 $167 $360
$255,000 $21,250 $5,950 $5,957 $1,200,000 $4,310 $1,120 $167 $360
$300,000 $25,000 $7,000 $6,862 $1,400,000 $5,029 $1,307 $167 $360
$320,000 $26,667 $7,467 $7,767 $1,600,000 $5,747 $1,493 $167 $360
$400,000 $33,333 $9,333 $9,936 $2,000,000 $7,543 $1,867 $167 $360
$500,000 $41,667 $11,667 $11,381 $2,200,000 $8,801 $2,053 $167 $360

 

Right now, I’m earning $170,000 in base income, and my husband makes $85,000. Based on our minimum income, that gets us to $1.2M of house… which isn’t enough here. To get to that $1.6M target (which is still a small house and a fixer upper), we need $320k in annual income. So either I need to consistently make $235k, or my husband needs to increase his income, or some combination of both.

What the above does not account for is that my annual bonus is $34,000. I have no idea if I will get a bonus this year or how much of it I will get. I have received my full bonus every year for the past 3 years BUT there is no guarantee I will receive a bonus in the future, or that future jobs will pay such a sizable amount in bonus. I’m not sure if I should include my bonus in my calculations or not. I’d rather not, because a bonus is nice to have for an extra vacation or gift for the kids vs worked into our planned home expenses. It would be nice if my base was $200k, so I could actually include that in the calculations. If I could get my base to $200k and my husband could figure out how to make $120k, we’d be in pretty good shape.

In addition to the base and bonus, I also receive a large amount of my income in RSUs. My refreshes have not been great, though. And if I lose my job, then I will not be able to obtain the same amount in RSU.

When I joined my company, my total compensation was as follows:

  • $165k (base)
  • $33 (bonus)
  • $56k (RSU/yr for 4 years) (*currently worth ~$350k+/yr)
  • TOTAL = ~$254k

My current compensation once I fully vest my first grant is:

  • $170k (base)
  • $34k (bonus)
  • $12k (RSU/yr)
  • TOTAL = $216k

So, that’s good, with bonus and RSU I’m still getting close to the $235k I need to make to afford a $1.6M home, but not quite, and that’s including bonus and RSU which are all variable.

What’s scarier is that if I lose this job, I have no idea if I will be able to do better than $150k salary with no bonus or RSU (I feel fairly confident I can find a job with $150k salary since before I started this job I had a few offers for that amount at startups that I turned down as they were way too low.) So do I base my home purchase off of $150k (me) + $85k (husband) = $235k/yr of income? Then we a afford a $1M house… so we can’t afford any house here and we’ll just continue renting. However, with my RSU growth, my income this year and next year are very high, and it “feels” like I should be able to afford more house. But can I?

Am I Having Another Baby?

Given it took months and $5000 of fertility treatments to conceive our first child, I was momentarily bewildered by a very faint pink line on a cheap-o pregnancy test I took two weeks after our first month trying for number two. I joked to myself, as I do, that of course my previously infertile PCOS-ridden womb would get pregnant the first month we tried. I’d be taking the test on Mother’s Day weekend, so it was only appropriate to find out that I was to become a mom – again.

I had taken a test two days prior and it was negative, but I figured I’d waste another cheap-o test and move on with my life. I was convinced that it was impossible to have conceived this month anyway, since my husband and I missed the time in the month I thought I was fertile. But then, as I blurred my eyes at the test, I saw not one, but two lines. I blinked. I waved the strip in the air. I walked away and came back. I took a picture of the strip and sent it to a close friend who knew I was hoping to get pregnant by fall. She responded, “you’re pregnant.”

I dug through my drawer of random things I never used and pulled out the more pricey early response tests I saved for when I might actually be pregnant. Took one. The positive line came back dark pink. “I’m pregnant.” My friend, with one more photo to document proof, confirmed.

Suddenly, my next year flashed before my eyes. I had imagined it all, but not quite so so soon. And with the coronavirus, everything became much more difficult and scary (I was aware of the pandemic when we were trying and decided at 36 with fertility problems and the hope to have at least one if not two more kids, we should get on with it — I figured we’d probably get pregnant in a few months and I’d be giving birth in spring 2021, maybe around the time a vaccine would be available–not exactly January 2021, in the middle of what could be a bad second or third wave.)

So the next year blur — a stomach growing bigger and bigger, being unable to sleep well and having all the horrible third trimester symptoms, not being able to travel to see my mother or sister or visit my childhood home that needs to be sold, the worst possible ways one might have to deliver with COVID-19 around–laboring with a mask and with full-blown corona symptoms unable to breathe, and then just the reality of now having 9 months to move from our one bedroom apartment (a needed impetus to stop being so frugal and get more space), I sat there and took in the reality of what this little pink line meant.

And despite all that worry, I felt really happy. I pictured my son, not able to interact with any other kids these days, having a sibling to grow up with. He has no cousins, and it’s unlikely he will have cousins (my sister is our only hope and if she does have kids it won’t be for quite a number of years), and I want to give him a family (this is also why I want 3 kids even though that’s kind of crazy… we’ll see how I do with two.) I pictured my kids growing up together and fighting and laughing and having fun and being silly.

I went to get my son out of his crib and he was the first to hear the news, and he kept my secret all day. We often jokingly ask him if he wants a brother and he exclaims “or sister!” so I asked him again and told him there is a baby in my stomach. He’s 22 months old so he isn’t going to understand but I made a cute video of telling him and planned to show it to my husband at some point. I knew he would be quite surprised.

That evening, as he was putting my son to bed, I sent him the video and told him I took a cute video of our son but it was too big to upload to instagram. I videoed him watching it. At the beginning I go “do you want a brother?” and so on. My husband, watching the video clueless looks at me and says “it’s a good thing you didn’t post this to instagram, people will think you’re pregnant” (classic) — a few seconds later, when the video reveals me handing a positive pregnancy test to my son as his “present” my husband figured out that he was right about one thing… people will think I’m pregnant.

But over the last weeks, I’ve had some reasons to think that this baby won’t stick. I won’t go into details, but I ended up having an early ultrasound and with only a gestational sac and a yolk sac seen, it’s possible the baby isn’t growing and isn’t viable. It’s also possible I’m just earlier than they think (which I know is true at least somewhat) and we just need to wait and try again in a few weeks. So I’m in wait mode now. I have another appointment on June 15 and will find out if there is a baby or I’ll have to make a horrible choice between getting a D&C, taking a pill to miscarry, or waiting for my body to handle it naturally. I’m hoping I don’t have to make that decision, but accept hat may be the case. I’m 36 now, and it’s just more likely that anytime I get pregnant we’ll hit a bad egg. I’m trying to tell myself that it’s good news either way–I’ve proven I can now get pregnant without fertility treatment, and I should be able to again. And if I am actually pregnant, well, that’s terrifying but amazing and I really can’t wait to have a baby again and grow my family and continue building the life I want.

I successfully achieved having $1M before baby #1 and I wanted $1.5M before baby #2 and I should get there, adding in my husband’s savings. And $2M before baby #3, if there is to be a baby #3, also seems possible. My personal capital account, which shows our pre-tax networth, is at about $1.4M right now. That seems insane to me, as I still remember looking at my mint account with about $10k to my name, wondering how on earth I’d ever save $100k. I have a good $350k sitting in cash for a downpayment (and soon will have another $50k more thanks to some strong performing company stock vesting soon) so everything is really just working out… somehow.

Why is it I still feel so out of control though… afraid to purchase a home… afraid to make any commitments or live slightly less frugally? I really want a home. I want a reasonably nice home, which seems to cost like $2M in the Bay Area, but I’m willing to settle for something a little cheaper, like $1.7M (sigh) and handle a house that isn’t perfect but that is a place to call our own… a place to make our memories. It’s time to leave this 800 square foot apartment and move on with our lives. I’ll miss it, but I won’t miss it that much. Not if we have a home of our own.

At this point, I’m waiting until my appointment next week to see how much we need to rush the moving situation. If there is no baby, then we have a little more time. If there is a baby, then we have less than nine months to move. Even if we wanted to, we can’t legally stay in a one bedroom with two kids. So here we are, family of 3 maybe about to become a family of 4, in the middle of a pandemic, having to buy a house and move and set up our life and figure out if we move south to have a little more house for our money or stay in the area we want to live and have a lot less house or who knows. I realize financially renting makes way more sense but I’m at this point where I feel like what is the point if we don’t have a home to put down our roots in… and a sense of stability and a place that is ours. I’ve saved $1.2M on my own and I know that’s not enough to really buy a house here… but on the other hand, having all that invested in the stock market is risky too and while it will probably perform well over time, why avoid buying the one thing I really want just to have a big number in the bank?

I hope I am pregnant and I hope this forces us to move and find a house and meet our neighbors and be grown ups and grow up. Life is so short and I can’t believe I’m almost 37 and really almost 40. I thought I’d be a lot more settled by this age, but I do think that my 40 I want to have some serious domestic accomplishments, not just financial ones. And I hope that when travel is possible again I can have a guest room for my mother and sister to come visit. I hope I can have a yard to have friends over and sit around a fire pit and maybe eventually buy myself a hot tub though that will probably never happen but it’s a thought. And a garage where I can store my bike and some other things so my living room doesn’t have to be my storage room and my living room and my son’s room with his crib and toys and slide and rocking horse. And my bedroom doesn’t also have to be my husband’s office.

I guess I’m tired of making smart financial decisions and want to make ones that make my life better now. I know I’m so fortunate to be where I am and have what I have. With all that is going on in the world right now, especially the injustices against the black community, I feel guilty being concerned with any of this mundane life stuff. But life still goes on, even as the world needs a big kick in the ass and a whole lot of fixing. I’d like to figure out how to contribute to fixing the world too, but I think part of that comes with my settling down and not having to spend a lot of my energy thinking about “what’s next” and instead focus on stability in my own life and how I can then give back to the world.

Anyway, lots going on right now. I very well may not be pregnant… but I could be. If I was 5w6d at my prior appointment, or even 6 weeks (which I think I was), then maybe it was just too early to see the fetal pole and heartbeat. Or maybe the doctor I saw (not my normal doctor) rushed the appointment and didn’t spend enough time looking because she knew if she found it or didn’t, it didn’t really matter at this point… she was just confirming the pregnancy was not ectopic, which it wasn’t. She did say maybe it’s just earlier than we think and gave me a glimmer of hope pointing to a little speck on the screen saying “maybe something is growing there” so there’s nothing I can do but wait.

…And even if my next appointment, where I think I’ll be 8 weeks and some-odd days, shows a healthy embryo and heartbeat, I can still miscarry at any time or have other complications before a healthy baby is actually born. So I don’t want to get my hopes up. My last pregnancy was relatively smooth, but my childbirth was not. I am trying to just have not expectations here other than hoping that I remain healthy and safe through whatever happens. And that maybe all of this leads to purchasing our home and really starting our life as a family together–I realize that owning a home is not a requirement to do that, but it still feels like something that needs to happen before I feel like I’ve made it as an adult.

 

Real Estate: Buying Property with Mother-in-Law?

The costs of home ownership in the Bay Area are, well, terrifying. My husband and I (and now my husband, his mother and I) have been visiting open houses each weekend –just to get an idea what, if anything, is in our price range. The short answer is–not much.

Although we’re definitely not wealthy, we now have the benefit (?) of his mother joining us in our home purchasing endeavor. And, by joining us I mean joining us to live with us in an in-law unit (or second unit of a duplex) that we purchase together. should be super-duper grateful that she’s offering a $1M cash downpayment to make this possible. I am. But I’m also super-duper nervous because the other $1M (since the properties we are looking at are about $2M) will come from my husband and I (mostly me myself and I) – and the way their family communicates is practically non-existent so I’d be wrapping my future everything up in a property that’s co-owned by his mother (or, she “gifts” him the money so it’s fully owned by us, but the ownership then is a lifetime of debt to her in other means.)

Do I like my mother in law? Good question. She is, for all intents and purposes, a quiet person who keeps to herself. She marches to the beat of her own drum, but we get along. Would I prefer not to live on the same property as her? Yes, of course. But she’s also willing to help out with childcare and as much as I am nervous about her providing childcare to my kid(s) once they’re of walking age (she’s doing a fine job now with the 10-week old), it’s certainly nice to not have to spend $20k+ a year on daycare, and it’s extra nice keeping it in the family.

The actual scenario we’re looking at is that his mother gifts us the $1M, we get a mortgage for $1M, then his father (who is not married to his mother–never has been–but who is friends with her) gives us $2k a month in “rent” to bring down the monthly costs. All-in-all, financially, doing this with a ~$2M duplex or a reasonable single family + in-law unit makes a hell of a lot more sense than spending $1.5M+ on a single family home with no future rental potential. Even if our mortgage is $7k a month, my husband’s father’s contribution of $2k brings that down to the $5k that is that max I feel comfortable paying monthly for our PITI. I’d like it to be less than that, but at this point realistically it’s not going to get under $5k for what we need to make this work.

I’m just struggling with the lack of fiscal communication here, and how it feels like I’m dealing with a bunch of elementary school students in handling a very serious, very costly purchase, should we make it. That said, what right do I have to ask for any sort of special communication when it’s my husband’s mother who is making this purchase possible at all… shouldn’t I just roll with it? He’s an only child, his mother has practically put her income after very low expenses under pillows her entire life, and she seems to want to offer that to my husband and my child(ren) more than spend it on herself… I mean, for a women who has never owned a home, car, or pretty much anything “new” in her life, I doubt she’s going to change suddenly and spend that money. If I thought she would, or even would enjoy spending it on something else, I’d refuse the cash. I don’t want to be responsible for destroying her retirement. But all she wants in her retirement is a small place to live with a backyard and, most importantly, to spend as much time with my child(ren) as possible.

The entire situation makes me so uncomfortable because even though I grew up with a lot of privilege and my parents providing for me, I have been extremely independent since I graduated college (outside of my wedding.) I feel guilty for the privilege I’ve had, but have always told myself that as long as I make my own money for the life I want to live once I graduate college, I’m doing right by the world.

There’s a very long post I will write one of these days regarding my own parent’s financial mess (my father passed away this summer and let’s just say the family networth went from $1M to $400k in about 4 years–again, that story will be saved for another post(s))–but I’ve been struggling too with coming to terms that I always thought there’d be something left to provide backup should I financially fall on my face one day–but the reality has sunk in that nothing will be left. I am in a much better financial situation than my sister who is 28 and still earning a little higher than minimum wage with no benefits, so I can’t complain. It’s still a scary feeling, nonetheless (to be written about in another post.)

But I’ve also saved up now $650k, give or take, in retirement and investment accounts, and I feel like I’m capable of buying my own property without the help of others. Well, I would be, anywhere else in the country. Here… anything under $1.5M is pretty terrifying, at least with a 30 minute commute from my job south of the city.

That leads me down the road of… why buy now? The prices are coming down a bit (I’ve seen a bunch of $100k price drops in the last few weeks which seems substantial), but do we really need to buy this year? Our 1 bedroom, 1 bath apartment lifestyle isn’t that horrible, especially given the size of our apartment (800 square feet) provides rather large rooms compared to 3br, 2ba houses for sale (some of those “master bathrooms” are masterly tiny.)

His mother doesn’t have to move now either. She’s still living in her parent’s house (I believe, for free, which she’s done her entire life), so she is ok there until her mother, who is in her 90s, passes away (clearly not wishing this on her at all, but there’s the reality that few humans live past 100.) Once she passes away, we don’t know what will happen with the property other than that it will be sold and, we think, his mother will get 1/3 of its value (possible that won’t be the case but no one talks in the family about things like that.) Even without that inheritance, though, she will still have the $1M waiting its use for a home purchase with or without us.

Part of me wants to power through the next few years in our 1br/1ba and enjoy the rent control we have with our $2450 rent. I’m 45 minutes from my office in rush hour, but maybe I can work out an alternative travel the where I get that sweet 30 minute each way drive. I’ve considered moving us closer to my office… but we can’t get anything near nice enough at $2450 a month. We could pool resources and live with his dad for $4450 a month… but we know without a private unit / in law that would be a mess. We’re not even going to try that…

So, we may just wait it out as long as we can. When his grandmother passes away, that will make everything happen faster, since his mother will have to move. Until then, nothing is making us leave this place. Our son can easily manage to live in a 1 bedroom with us until he’s at least one, and maybe longer. It does suck not being able to invite people over, but heck, what people would I invite over? I don’t really know anyone. And I work all the time anyway, or at least I will when I get back from maternity leave.

That seems like the right option– even though we could qualify for a loan that, with his mother’s cash, would enable us to buy a property now. Yet I’m not sure buying is right at all anyway… home ownership is a hot mess from what I can tell… it’s costly, it takes all your time, there are issues you don’t know about when you buy that pop up later… and in the Bay Area you have to buy “as is” with no contingencies which just sounds like a recipe for financial ruin. Why bother?

Well, why bother because I have a kid and I want him to have a stable life… both my husband and I grew up in houses from the day we were born until adulthood, and we value not moving around every couple of years, especially for our family. So there’s that.

Leave the Bay Area? Maybe. If we don’t buy now… and if I can keep my current job for the next 3.5 years to collect my stock, and that stock remains valued at what it’s worth now or more, then who knows… we could pick up and move. His parents won’t want to, but we could buy a place on our own. He wouldn’t want to be far from his parents, so–I’m not sure it’s really an option, but if we can have another kid (or two more kids) it may be the best one.

In any case, I’m not sure what to do… as always… but after looking at probably 100 open houses over the last year… all I can say is I really don’t want to buy anything I’ve seen. That’s not a good sign.

Will I ever feel or be stable enough to buy a house?

I’m not sold that the American Dream of a white picket fence is the wisest financial move in the grande scheme of things. But, at 34 and pregnant with my first child, I long for the stability of a home with at least a small backyard and just – space.

Even though my networth is $540k, I’ve never felt stable enough in my career to purchase property. I thought by now I would – but I don’t and I don’t think I ever will. Given my husband is going back to school and will be starting over with a job making $50k, if we’re ever going to own it’s pretty much all on me. We can certainly rent a house – but when my child gets older, I’m afraid of having to downsize due to losing a job. I almost feel better about staying in a one bedroom apartment with the kid, and saving for as long as possible. Plenty of people do it, why can’t I? Continue reading Will I ever feel or be stable enough to buy a house?

My downsized goals: chasing the miniature American Dream

The baby (singular or plural) may – or may not – happen. But, I’m turning 34 NEXT FUCKING WEEK and I feel like I need to have some new goals in my life. Some new goals that involve not living like a just-graduated-from-college person for the rest of my life.

I was absolutely fine living my 20s in shared living situations to save money, and my early 30s were completely acceptable sharing a 1 bedroom apartment with my husband. But – as I’ve taken home $160k+ per year, minus taxes, for the last 3 years – I wonder what on earth am I doing this for if I can’t have some semblance of the adult life I want.

All the east coast dreams of the grande house with the huge backyard are gone. I’ve downsized my objectives – but I still have them. I’d like to own a house on not-the-crappiest street. I’d like to be able to take time off in the future (in health or in sickness) and not worrying about running out of money. I’ve made progress, but I still have a long way to go.

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The plan (with flat stocks):

2017 – close the year with ~$525k networth
2018 – savings = $45k investments + $30k after-tax bonus = $600k
2019 – savings = $45k investments + $40k after-tax bonus = $685k
2020 – savings = $45k investments + $40k after-tax bonus = $770k
2021 – savings = $45k investments + $40k after-tax bonus = $885k

OR

The plan (with ~5% growth):

2017 – close the year with ~$525k networth
2018 – savings = $45k investments + $30k after-tax bonus = $625k
2019 – savings = $45k investments + $40k after-tax bonus = $740k
2020 – savings = $45k investments + $40k after-tax bonus = $862k
2021 – savings = $45k investments + $40k after-tax bonus = $990k

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This all assumes I can perform well in my current job for the next four years, age 34-38, and not take significant time off, all while (hopefully) having two children.

My goal has always been to have $500k in the bank before having children. I have obtained that goal. My next goal is to have $1M in the bank before 40. Ideally well before 40. I’d like $1M in the back as my emergency fund and retirement fund and the fund which I do not touch. Over this same time, my husband will be doing what he does and not investing his money because he’s very risk averse. This is fine, because he will be saving up for the down payment on our (not in this part of the country) house.

Assuming I have one child in 2018/19 (age 34-35); and one in 2020/21 (36-37); by the time I have achieved this plan, I have one child who is ~3 and one who is ~1. This will enable us to, before we have to think about putting the kids into school, move to a part of the country where housing is more affordable. My husband can continue his career as a teacher in a region it is more cost effective, and I can perhaps pursue an entirely new career – or take time to spend at home with the kids.

I realize $1M is NOT “early retirement.” This is step two in my… however many step, not very well thought out plan…

Step 1: $500k before having children (age 30-35)
Step 2: $1M before 40 / + $200k cash downpayment (husband)
Step 3: $2M before 50 / + home 33% paid off (or more)
Step 4: $3M before 60 / + home 66% paid off
Step 5: $4M before 70 / + home 100% paid off / retirement

I’m not sure if any of that makes sense. So far steps 1 was achieved (woohoo) and step 2 seems like it might be achievable, if I can hold on to this job for the full four years. I am going to hold on to it with all my might. The having kids things definitely may throw a wrench in this plan regardless, but I’m hopeful I can take minimal time off for my kids when they’re really young (and/or work remote and still do my job, which might be possible)… then, after four years, we leave. We have to leave. We will never be able to afford a house here. I don’t know why that’s so important to me – I realize homeownership is a horrible financial decision – but it is. I can’t shake it. I want to design my own bathroom and kitchen… I’d like a backyard I can sit in and enjoy the sun without feeling the prying eyes of others all over me. I want a place for my children to grow up and a home to know.

So, that’s the plan. It suddenly seems all so very short term. I feel quite old. 34 is no joke. 34 is just a few years away from 40. And 40 is no longer fake adulthood. It’s serious, full-on, you’re an adult – and you’re only going to get MORE adult until you’re PAST that… and, I’m trying not to freak out about that, because I know life is so very short, and I need to just enjoy the moments and try to achieve some semblance of both freedom and control before I’m too old to enjoy it.

 

Mint’s "Goals" Depress Me.

It’s been a while since I’ve written on here because I’ve been so busy lately. Which is a good thing. I’m working a full-time job, spending some time on a side project, and not spending all that much money. All in all, I’m doing “good.” Heck, I’m doing amazing right now in relation to how I’ve done at any point in my life before – financially, personally, etc.

Yet I feel so far away from reaching any of my goals. Mint’s new Goals feature makes my future look terribly bleak. Especially given that my current salary — of about $120k per year, give or take — is temporary at best — and even WITH that salary I can’t save enough to reach my “goals.” At least according to Mint.
I made four different goals for myself…
Emergency Fund — I have my $8k in that, and it’s the only goal I’ll reach.
Save for Grad School — I need to save $110k, I’ve saved $1.4k. Yikes. At this rate I’ll go to to grad school by the time I’m 90.
Buy a Home? Yea, right. I need to save $207k for a downpayment. I haven’t really saved anything for a downpayment yet, but I’m counting my various non retirement investment as savings for a downpayment (which, it is if I ever want to buy a house.) Ok, so how much do I have saved now? A whopping $13k. Mint so nicely reminds me that I’m “4 years and 10 months behind” my savings goal. Granted, I wrote that I want to buy a million dollar house – but that’s not unreasonable where I live. That’s a pretty small house where I live. And I’ll never do it. Ok, so I’ll rent forever. Or I need to more to Kansas (I guess I’m renting forever.)
Retirement? Well, I’m doing OK on that goal. It doesn’t LOOK like I’m doing ok since according to Mint I need to save $6,362,665 by the time I’m 65 to hit my retirement goals. Yikes. Yea, so that’s giving me $80k per year in retirement income and I doubt I’ll need that much money when I retire, but I wouldn’t mind having it. I have $22.8k saved so far, at 26. You may say I don’t REALLY have $22.8k saved because that money will probably have to go to the down payment on my house one day when/if I want to buy one. Which SUCKS because I don’t want my retirement savings to go back to zero.
I know it’s good to be honest with yourself about your goals and how much you have to save, but really this is just terribly depressing. And as I contemplate seriously applying for graduate school next year, I am forced with knowing that grad school will make my goals even further from ever becoming a reality. It almost makes me want to give up. I’ll never own a house and never have enough for retirement. I’ll be lucky if I can buy myself another car when this one dies.

Should I Rent Forever?

I’ve been fairly happy renting thus far in my life. At 26 years old, I’ve never really contemplated owning my own place until now. My rental costs have varied greatly over the years…

2004-2005: Chicago, 2br apartment shared w/ 3 people in a nice area. I lived in the living room w/ a curtain for a door for $460 a month. I think some utilities were included in that too.
2005: lived in DC, where I rented a room with a semi-private bath for $800 / month. Utilities were included. Then I moved to California, where my first place was “free” but it was really part of my internship stipend. Soon after I moved again… to a 4br, 2ba apartment shared with 3 other girls (and their friends on occasion) for $480 / month. When I got a full-time job, I decided I deserved my own place, even though I was making about $35k per year. So I found a studio with utilities included for $900 / month. In a year, the rent for that studio went up to $1100 / month. Even though I knew this was a lot, I didn’t want to deal with moving and I liked where I lived. So I stayed one year. Then they raised the rent to $1350 / month and I decided to leave the apartment complex and look for a more affordable, room-share situation. I found a place in a nice condo complex for rent with a smaller personal living area but a nicer all-around apartment for $635 / month plus utilities split between myself and two other girls.
The problem is that now I live far from my job so the cost of the monthly commute is about $230 / month for parking at the public transit station plus the train, and that’s not including the gas it costs me to get to and from the train. So… you could say now I’m spending $300 / month on transportation, or $1000 / month on “rent” including transportation and utilities. So I ask myself… should I move? If I do move, how much should I pay for a place? While my roommates and I aren’t best friends, we get along fairly well, and I’ve gone through my share of roomie nightmares in the past, so I’m not in the mood to get into any of that mess while just getting into the jive of things at my new job. Still, the cost of the commute plus the actual commute (about 1 hour 15 minutes each way) will eventually get to me. I could even find a place that costs the same or cheaper slightly closer to work… maybe 30 minutes closer… because there are some areas that are not as nice as where I live now that are on the way towards the public transportation stations. I really should be living there. But I just don’t want to deal with moving.
Then, the idea always pops in my mind… what about buying a home? Well, that’s really not possible right now… the average costs of a 1br condo here are like $600,000. Given that I only have $50k in savings at the moment… it will take me a long time before I could even afford a down payment on that. And the more I think about it, the more I realize owning a home… at least in this area… may never make any sense. It’s just too expensive. I look at how much my parents still pay for their house after all these years in mortgage and property taxes and homeowners insurance and think, wow, I should really just rent forever.
Of course, when I have kids one day, I guess it would be nice to own a home. I liked growing up in one place all my life… I think it would have been really tough to move around a lot, being as shy as I was. Then again, lots of families move a lot and they do just fine. And you don’t have to move all the time in a rental, you just never know when your landlord will decide they need you to leave. I guess that on its own is enough reason to consider owning. But really, how can anyone afford home ownership here? This year I’ve hit six figures… I may even make $150k this year, and that isn’t near enough for me to own a condo or a home in this area. I think I’d have to be making something like $300k / year before I could even really consider owning.
Do you own a home? Do you rent? What’s your monthly cost for owning or renting? Why do you own… or rent?

Ridiculous to Stay, A Pain in the Ass to Go

Ah, it’s a beautiful Saturday morning in my lovely studio apartment. The spring air is keeping the room cool – in a few weeks it will be piping hot outside, with the heat somehow collecting in between the walls of my studio.

In the background of my waking state is TLC’s “My First Home.” A couple is looking for a home in the Bay Area, and they’ve found one they loved.

Meanwhile, I search Craigslist ads vigorously. It’s not that I’ll find a place to move today, as my move-in date is July 1 at earliest, but I’m still trying to decide whether to leave my complex for a more affordable option or stay here and deal with a tight budget and less savings.

When I moved in and the studio cost $905 including utilities, it wasn’t that much of a jump from the $700 + utilities room share options available on the market. For $100 extra dollars, approx, I could have a place of my own. That was a no brainer.

Then rents went up to $1050 and I decided to stay. It was a shock, surely, but it still seemed like a pretty good deal given my options.

$1300 – is about double what I could be paying for a room share situation. I could even compromise and get a room and bathroom in a 2br/2ba condo apartment for less than the $1300.

Moving is such a pain in the ass, though. I could hypothetically “move” for little cost, if I can get some friends to help. As far as furniture goes, I don’t have much. The only large thing I’m sold on keeping is my bed, since I bought that new for a whopping $800 two years ago (I decided after 6 months on a used futon with poor support, I deserved a good night sleep). I have a large bookshelf I got at Target a few months ago and it’s really heavy – but it would be a shame to toss that! Other than the bed, bookshelf, and some small tables, I have a piece of crap IKEA coffee table that started to fall apart before I put it together (though it’s functional) and a large horizontal dresser that I could part with – I’m not sure anyone would want to buy it, but I’d consider trying to sell it on Craiglist. I have plenty of room in my closet now for my clothes, and I’d hope that wherever I move would have at least this much closet space. Then there’s a TV, a printer, a microwave, and other odds and ends. I really don’t have that much stuff. It’s still a bitch to move, but it’s not like I’m moving a house worth of life. It’s just whatever I could fit in a studio for the past two years.

Also, having less space might be good for me. It would keep me organized as there wouldn’t be places to hide things. Heh.

The downside of getting a roommate is – well – obviously enough to have me living in a studio currently. Noise. Roommate drama. Not being able to cook naked in the kitchen. These things are hard to compromise on. 🙂

My biggest fear is that I won’t find anything I like. I have some cushion. If I decide to move – I’d come back to California around June 20-something, and I’d have that time to finish getting out of my apartment. I’d put my things into storage and move in with my good friend who has offered up her second bedroom. I’ll pay her rent, but it will be way less than what it would cost to stay in my studio in August. $1300 versus, maybe $500 or something (plus whatever it costs to put my things in storage for a month.) That will cover the 2 weeks in June that I can’t work because I’m going to be in Israel on vacation. Then I can really take some time to find a good living situation.

The real question is, how picky am I? I get anxious in so many living situations. Finally, in this light and airy studio I feel, well, at the very least calm and comfortable. The greenery outside (beyond the parking area) makes me happy. It almost reminds me of home, back east. I love waking up here.

But is it the stupidest thing in the world not to move? If I did move, I’d look for a place ideally that costs less than what I’m paying now, so I could pay under $1000, and I’d put any extra money between that and the $1300 I would be paying for my studio into a special down payment fund. I’m tired of renting, and dealing with yearly rent increases.

I just wish I felt more settled. All of my friends are getting engaged and married. Buying homes. Me? Well, I’ve been in a relationship for two years. We joke about moving in together one day but we’re talking more apartment than house. He’s going to grad school in fall 2009, and who knows where I’ll be. That’s why it really doesn’t make sense for me to buy anything right now. Even though the prices for condos in the area are coming down while rents are going up, up, up.

The more I think about it, the more I realize the only logical option is to move. I could be saving $500 a month if I find a place for $800, or $6000 a year. $6000 a year is nothing to shake a stick at. That’s a huge chunk of change to go to my downpayment fund. Even if it’s $4000 and I get a slightly nicer place, it’s still a lot of money.

*sigh* – I just… wish there was an obvious option hitting me on the head. But life is never so black and white.